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As we head into 2024 – a presidential election year that will undoubtedly be a defining year in our country's history – I am reminded of James Carville's famous words in the 1992 presidential election: “It's the economy, stupid. “
The Biden administration continues to promote Bidenomics even though the majority of Americans believe they are worse off economically than they were during the Trump administration. Americans also believe their economic prospects would be better under a second Trump administration.
Speakers on financial networks paint a rosy economic picture for the coming year. Are they right or are they simply parroting the current administration's talking points?
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BIDEN BRAGING ABOUT THE ECONOMY Makes Him Look 'Out of Touch' With Mainstream America: Economists
The economic data is sending mixed signals, but I believe 2024 will be a rocky road.
An election focused on his economic performance could cause President Joe Biden to lose his job. (AP Photo/Evan Vucci)
The November 2023 consumer price index, the leading indicator of inflation, was 3.1%. A good number, but higher than the Federal Reserve's target of 2%.
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Core inflation, which eliminates fluctuating food and fuel prices (which hit working Americans the most), remains very stable at 4%.
However, when you look at the inflation rate compared to 2021, the narrative changes. The inflation rate was 7.1% in November 2022, meaning prices are more than 10% higher than in 2021.
The effects of inflation are destroying middle class and working Americans.
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Credit card debt is at a record high of over $1 trillion. Unfortunately, people don't go into debt to buy 75-inch TVs and travel to Paris, they go into credit card debt to pay their rent, their utility bills, and their grocery bills. And for the privilege of doing so, we pay almost 25% interest.
And it is becoming increasingly difficult for working Americans to acquire credit. “In the 12 months to June, 21.8% of loan applicants were rejected,” and the situation is only getting worse.
Beyond record credit card debt, we are seeing record numbers of people taking out emergency loans against their 401K savings plans, with emergency withdrawals increasing by 27% in 2022.
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Additionally, more and more working Americans are relying on buy now, pay later schemes to finance their expenses.
President Joe Biden has struggled with bad economic news throughout his term in office. It could finally catch up with him in 2024. (Oliver Contreras/Bloomberg via Getty Images)
Record debt levels are starting to impact the economy.
According to a recent study, the American dream is unattainable for 99% of Americans.
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According to a real estate data provider, last year researchers examined average home prices for “approximately 575 U.S. counties and found that home prices in 99% of those areas are beyond the reach of the average earner, who makes $71,214 per year.”
And among those trying to buy a home, the percentage of home purchase cancellations reached 16.3% in September, representing about 53,000 contracts canceled that month.
Car repossessions are also on the rise as people who bought new cars with government COVID-19 funds realize they can't afford their new Porsche.
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Finally, unknown to most economists is that student loan repayments were scheduled to begin in October, meaning 22 million people had to pay new bills. According to the U.S. Department of Education, only 60% of these borrowers made their first payment “by mid-November.”
These conditions are beginning to reflect how working Americans think about 2024. “The University of Michigan Consumer Sentiment Index ended the month at 61.3, down 3.9% from 63.8 in October. The current conditions index fell 3.3% to 68.3, while the future expectations index fell 4.2% to 56.8, according to US News & World Report.
So what does this mean for America?
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I believe that as holiday credit card bills come due in 2023, we will see a significant decline in US consumer spending, forcing people to make difficult decisions about how they spend their money.
Oil prices will continue to rise as Houthi rebels disrupt free trade across the Red Sea. Oil prices are currently at $75 per barrel and will easily reach $80 before the New Year.
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The economic data is sending mixed signals, but I believe 2024 will be a rocky road.
The decline in traffic through the Panama Canal will impact American retailers starting in the middle of the first quarter of 2024. We will see higher prices and shortages on shelves.
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2024 will be rocky. The US economy will slow and may experience a mild recession. Unemployment will rise and consumer spending will decline as working Americans try to pay off debt.
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The most important economic driver will be the presidential election in November. 2024 will undoubtedly be a year of “the economy, idiot,” and the American people will have the final say this November.
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